The term’ economic reform’ usually refers to changes made to existing laws and policies. India introduced several Economic Reforms In India to promote economic stability and improve the economy. The primary aim of these was to establish a good economic standing and cater to the need for Economic Reforms of the country and its people. India faced a major crisis in 1991, after which it had to find ways to improve its economic situation and had to take steps to introduce new reforms. Since India’s independence, the country’s financial sector has seen significant changes.

Banking Reforms, 1969: 

• The nationalisation of banks is referred to as banking reform. 
• Indira Gandhi, India’s only female Prime Minister, took a crucial step in 1969 by nationalisation of 14 banks to meet the growing demand for bank nationalisation. 
• The nationalisation of banks resulted in centralisation of banking services, which promoted uniformity. 
• Nationalised Banking services meant that there would not be a monopoly in this sector.
• Along with these benefits, nationalisation made credit accessible for all, not just the privileged section of society. 
• Lack of sufficient credit and inefficient banking sector operation were the reasons for this step.
• As a result, banks can run more efficiently, and the public’s trust in them has grown. 
• Several Non-Banking Financial Institutions (NBFIs) and Banking Financial Institutions (BFIs) have also emerged in this industry.

Abolishing ‘Privy Purse,’ 1971

​​The ‘Privy Purse’ was a reward or payment made to the royal families of princely states that were forced to join independent India in 1947.

• This step aimed to take away all the authority from these families by paying or rewarding them. 
• Indira Gandhi argued for its elimination in 1971 to promote equal rights for all citizens and lower the government’s revenue deficit. 
• It was a significant setback for the Indian royalty, who now had to pay taxes and were no longer exempted from the law.

Stopping the ‘Licence Raj,’ 1991

• Before obtaining a licence to operate, a company needed to gain the support of 80 government companies. This was done to discourage private companies and businesses from being set up.
• Even after acquiring the licence, the companies had to face restrictions. 
• In 1991, the Licence Raj was stopped, and private businesses could be set up easily. 
• Dr Manmohan Singh, the then-Finance Minister, was instrumental in ending the Licence Raj in India.

New Economic Policy, 1991:

• After the crisis of 1991, Economic Reforms In India were introduced to improve the country’s situation.
• The New Economic Policy of 1991 has three essential components: liberalisation, privatisation, and globalisation, also known as LPG.
• Increased competition, higher demand, adoption of new technology, development of human resources and skills, and increased focus on customers have been some of the benefits of these reforms.
• Since the liberalisation process began, the Indian marketplace has opened up to both private and public sector enterprises. 
• The private sector was encouraged to grow, and only 8 industries were restricted to the public sector in 1991. 
• This growth of the private sector is known as privatisation. 
• Slowly, the country began to carry out enterprises with foreign organisations. A change popularly called globalisation.

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

• It is an act of the Indian Parliament to combat black money, hidden foreign assets, and income. 
• It involves imposing tax and penalties on such income.
• The Lok Sabha passed this Act on May 11, 2015, and the Rajya Sabha on May 13, 2015. 
• This law aims to bring income and assets held outside the country back into the country. 
• Failure to obey the rules under this Act has serious outcomes, including fines and possibly imprisonment.

Foreign Direct Investment (FDI) in various sectors

• Foreign direct investment (FDI) is a useful source of funding for the development of Indian enterprises and the economy. 
• When foreign corporations invest directly in Indian companies, Indian companies benefit.
• At the ‘India ideas’ conference on July 22, 2020, Indian Prime Minister Narendra Modi declared that India had managed to attract 20% more FDI than it did in 2019.
• Inflows of foreign direct investment into India in 2019-2020 were 74 billion dollars, up 20% from the previous year.

Goods and Services Tax (GST):

After nearly 20 years of implementationof VAT under the Vajpayee government, Prime Minister Narendra Modi finally put GST into effect on July 1, 2017. Following are some benefits of GST:

•  The establishment of a single national market, a push for the “Make in India” project, increased investment and jobs, a simplified tax structure, ease of doing business.
• Procedures that are more automated and make better use of information technology.
• Compliance costs are reduced, and agriculture, trade, and industry benefit.
• It benefits small traders and enterprises.
• It removes the application of taxes at every stage of supply.
• Although GST has been criticised, its benefits exceed its drawbacks.

Demonetisation, 2016:

On November 8, 2017, Prime Minister Narendra Modi announced the demonetisation of all Rs. 500 and Rs. 1,000 banknotes. The following are the goals of making such an announcement:

• Reduce the use of black money, increase cash in the banking system, stop the handling of fake currency, reduce all possible finances for terrorists.
• Many limits were placed on the government’s plan to stifle it. The general public ran into several issues in meeting the standards on such short notice. 
• According to recent estimates, India is still recovering from the demonetisation shock despite the rise in popularity of digital payments and cashless transactions.

National Institute for Transforming India (NITI) Aayog

• Narendra Modi established the NITI Aayog on May 24, 2014, to replace the long-standing Planning Commission. 
• The goal of this was to fulfil the Need for Economic Reforms. 
• The NITI Aayog is the Indian government’s top policy thinktank, offering directional and policy suggestions.

Considering ‘start-ups’ as a new business model:

The Indian government’s ‘Start-Up India’ scheme aims to increase employment and income development in the country. On January 16, 2016, Narendra Modi announced the introduction of this scheme, which includes the following benefits: – 

• The scheme assisted in having a better workflow, financial assistance, easy access to government bids, and increased networking opportunities.
• Increased competitiveness, higher transparency, comprehensive digitisation, increased innovation, and increased policy stability have all been achieved due to reforms.

Conclusion

Post-Independence, India faced the responsibility of rebuilding its economy. Thus, reforms such as the abolition of privy purse and licence raj and banking reforms were introduced. In the 1991 crisis, the Indian government introduced the New Economic Policy 1991, also known as LPG reforms. In recent times, with the introduction of GST and demonetisation, the country aims to continue growing on the economic front. With the rapid pace at which changes and developments occur, one can only hope that the Indian economy and land will continue to grow in the years ahead.